Biggest bang for my dollar

6 Replies

Hello everyone.  I am looking for some solid ideas or direction as I am focusing on growth of my real estate company.  I have been flipping houses in my area now for the last 3 years because the market is very strong right now and the profits outweigh the long term growth.  I have a significant amount of cash that I would like to invest, but not sure what I should do.  I want to continue flipping a few per year as I really enjoy the projects, but I need additional rentals as I feel I'm trading hours for dollars.  I currently have 2 residential rentals, and not sure I want the headaches of multiple house rentals.  However, I am considering small apartment buildings.  I would like some additional passive income along with cash.  Any strategies you might suggest?  

Thank you,

Justin

I'm an advocate of buying rental units and making sure you rent to people that are qualified.  Set clear and legal expectations (i.e. income minimums, references, credit score, etc.) and do your due diligence before renting and you will minimize the headaches while generating a nice passive income.  Be a great landlord, be selective when renting, and you will enjoy lots of benefits.  

Apartments, self storage, or industrial. You're probably most familiar with apartment aspects given your familiarity with residential construction. So I'd start with them. 

At the end of the day, an apartment value add project is very similar to a flip. Only it takes longer, cash flows better, lower cost debt, and has much better tax treatment.

I'm biased because it's been so good to me but I'd recommend you take a hard look at self storage. I've helped two high volume house flippers parlay their skill sets into the storage World. Using the same skills that allowed them to flip 20-40 houses per year, they've each bought 3-6 storage properties in the last 16 months. They both cited residual income as the reason they "made the switch".

Justin,

If you are looking for passive income, look into stocks/bonds. After having rentals, and realizing they are not really passive, spent time looking into investment and it truely is passive income, if you do index based investment. You can look up 3 fund or 4 fund portfolio or look for boglehead guide for investing(from the founder of Vanguard).

Even something like a REIT is great option https://investor.vanguard.com/...

I can add more, let me know. Also with REITs for e.g., you can also use the 20% QBI normally used for rental income.

Originally posted by @Michael Wagner :

I'm biased because it's been so good to me but I'd recommend you take a hard look at self storage. I've helped two high volume house flippers parlay their skill sets into the storage World. Using the same skills that allowed them to flip 20-40 houses per year, they've each bought 3-6 storage properties in the last 16 months. They both cited residual income as the reason they "made the switch".

With REIT's and Uhaul aggressively expanding into secondary and even into tertiary markets what do you see for the future of this biz? The level of competiton in the industry is unprecedented, even my 79yr old grandmother has noticed the massive influx of SS facilities.

Case in point. I recently looked at a facility but passed due to a local chain opening a new facility down the road. A month later Uhaul announced they were dropping a 100,000sf CC facility next door to the facility I analyzed effectively saturating the market. This was a town of 26k people. 

The scalable operations side of the business are attractive but it seems the business is becoming saturated due to low barriers of entry and consolidation by the big guys. 

Though wise to note the trends that you do, I think the risks are easily mitigated. For one, the consolidation you mention is far less an issue than the national articles would have you believe. Though it is happening, over 80% of storage facilities are still of the mom and pop variety. I focus primarily in tertiary rursl markets where the big guys don't play.

as for you example, I would caution against letting news of "national trends" and one example of a saturated market cause you to turn a blind eye to the thousands of underserved markets where consolidation has not, and likely never will emerge.